Is it a buyers’ market or a sellers’ market? Why does it matter? These are two important questions I’ll answer here.
First, why does it mater? If you are looking to purchase a property and it is a buyers’ market you can try offering a price lower than the asking price, ask the seller to pay some or all of the closing costs, and during escrow ask the seller to pay for repairs. On the flip side if it is a sellers’ market the buyer needs to consider offering more than the asking price, have sufficient funds to cover their closing costs (about 3% of the purchase price), and be selective on requests for repairs made to the seller. Obviously it’s important to be aware of this so one can take advantage of their position or beat out the competition. The difficult question to answer is what type of real estate market we are in.
When there is more supply than demand it is a buyers’ market and when there is more demand than supply it is a sellers’ market. So now the question comes down to supply vs. demand. A common way of assessing this is to calculate the Absorption rate, i.e. how quickly a home will typically sell in the current market. Absorption rate is calculated by dividing the amount of inventory by how many properties are selling in a month.
1 to 4 months supply of homes is a Sellers’ Market
5 to 6 months supply of homes is a Normal Market
7 or more months supply of homes is a Buyers’ Market
The real estate market we are in today is not an ideal market to calculate the absorption rate because of short sales. When an offer is submitted to a bank on a short sale it typically takes 60 to 90 days to hear back and during this time the listing agent usually puts the property into a status of Contingency, which removes it from the actively supply count. In this state the property is not actively being sold neither is it in escrow. The following data is a look at the San Diego County real estate market as of December 26, 2009. First we look at San Diego County by geographic regions then break down the numbers by price.
All of San Diego County
Active homes for sale: 8491
Contingent homes: 4280
Sold homes in last 30 days: 2661
Absorption rate of active homes: 3.2
Absorption rate of active and contingent homes: 4.8
North San Diego County
Active homes for sale: 3267
Contingent homes: 1382
Sold homes in last 30 days: 984
Absorption rate of active homes: 3.3
Absorption rate of active and contingent homes: 4.7
Central San Diego County
Active homes for sale: 2425
Contingent homes: 1035
Sold homes in last 30 days: 710
Absorption rate of active homes: 3.4
Absorption rate of active and contingent homes: 4.9
South San Diego County
Active homes for sale: 883
Contingent homes: 1110
Sold homes in last 30 days: 504
Absorption rate of active homes: 1.75
Absorption rate of active and contingent homes: 4.0
East San Diego County
Active homes for sale: 745
Contingent homes: 459
Sold homes in last 30 days: 232
Absorption rate of active homes: 3.2
Absorption rate of active and contingent homes: 5.2
Up to $200,000 Homes
Active homes for sale: 1589
Contingent homes: 1571
Sold homes in last 30 days: 647
Absorption rate of active homes: 2.5
Absorption rate of active and contingent homes: 4.9
$200,001 to $400,000 Homes
Active homes for sale: 2227
Contingent homes: 2006
Sold homes in last 30 days: 1170
Absorption rate of active homes: 1.9
Absorption rate of active and contingent homes: 3.6
$400,001 to $800,000 Homes
Active homes for sale: 2403
Contingent homes: 729
Sold homes in last 30 days: 713
Absorption rate of active homes: 3.4
Absorption rate of active and contingent homes: 4.4
$800,001 to $1,500,000 Homes
Active homes for sale: 1265
Contingent homes: 80
Sold homes in last 30 days: 163
Absorption rate of active homes: 7.8
Absorption rate of active and contingent homes: 8.3
$1,500,001 to $5,000,000 Homes
Active homes for sale: 977
Contingent homes: 27
Sold homes in last 30 days: 47
Absorption rate of active homes: 20.8
Absorption rate of active and contingent homes: 21.4
$5,000,001 plus Homes
Active homes for sale: 190
Contingent homes: 2
Sold homes in last 30 days: 2
Absorption rate of active homes: 95.0
Absorption rate of active and contingent homes: 96.0
Note: Small towns and communities far from the major populated areas were not used in the breakdown calculations of the county, which is why their sum does not add up to San Diego County as a whole.
It is easy to see that San Diego County is in a sellers’ market for the majority of the categories. I don’t expect prices to rise as long as there are distressed homes on the market but once they are gone don’t be surprised to see prices jump 15% to 20% within a year.
Even though it is a sellers’ market there are still good reason to buy real estate now.
- Historically low interest rates (There are predictions the Feds will raise rates about three times in 2010)
- Cost of renting similar to that of owning
- $8000 tax incentive for first time buyers, $6500 for other buyers
- Depressed prices
If you want to know the absorption rate of a particular area contact us at 877homes@gmail.com
Visit us at www.877homes.com
Tuesday, December 29, 2009
Buyers’ Market vs. Sellers’ Market
Friday, November 27, 2009
California Real Estate Buying Process
Real estate transactions in California do use a third party called an Escrow. After one finds a home and begins the buying process, one will hear about "opening escrow" and "closing escrow".
Also, there is not a final closing meeting. Very rarely do the buyers and sellers even meet each other.
The following Timeline shows the steps and process of a real estate transaction in California. The Timeline is not all-inclusive nor the days exact as the Purchase Contract will dictate what is required and when. With that said the Timeline is however, a good guide for the ideal and typical real estate transaction.
(Day -1) Buyer has met with at least two Loan Officers and has in hand two GFE’s (Good Faith Estimate). Seller has all Disclosures Forms and a Wood Destroying Pest Inspection completed
(Day 0) The purchase offer is signed by both buyer and seller
(Day 1) Escrow is opened
(Day 1-3) Buyer’s earnest check is delivered to escrow
(Day 1-7) By the 7th day the seller has delivered the following items to the buyer
- Seller’s Disclosures
- Wood Destroying Pest Inspection Report
- Natural Hazard Zone Disclosure Report
- Preliminary Title Report
(Day 1-17) By the 17th day the buyer has the following items completed
- Reviewed and signed seller’s Disclosures
- Reviewed and signed the Wood Destroying Pest Inspection Report
- Reviewed and signed the Natural Hazard Zone Disclosure Report
- Reviewed and signed the Preliminary Title Report
- Ordered, reviewed and signed a Physical Inspection Report
- Ordered, reviewed and signed any additional Inspections the buyer deemed necessary
- Submit a Request for Repairs to the seller
- Remove all required Contingencies
(Day 18-29) Seller has all the work in section 1 of the Wood Destroying Pest Inspection Report and all agreed items in the Request for Repairs completed
(Day 26-30) Buyer does a Final Walkthrough of the property
(Day 30) Buyer signs closing and loan documents
(Day 31-35) The loan is funded, the property recorded and the buyer receives the Deed and keys for the property, which closes escrow
When you are ready to learn more about San Diego real estate give me a call or shoot me an email. Together we can find the perfect fit for you. www.877homes.com
Friday, October 30, 2009
Can Foreigners Buy Real Estate in America?
There are many types of Visas from work Visas to student Visas. A permanent Visa can take years to get but a foreigner looking to invest $500,000 to $1,000,000 can get on the fast track to obtaining a Visa. (Contact an expert at 877homes@gmail.com for more information)
The process of buying real estate in California is simple: 1) select a property 2) make an offer 3) negotiate and sign a contract 4) contract for and inspections and read and agree to all disclosures 5) finally pay for the property.
1) Finding and Selecting a Property
Though self-explanatory for the best results select a reputable real estate agent and provide them with your personal parameters such as price range and square footage. Since, most people like to be independent ask your agent for access to properties meeting your parameters listed on their websites and in the MLS (Multiple Listings Service). Agents will have access to all the contact information necessary to set up appointments for your viewing and inspection of selected properties. As your agent we feel we are best qualified to meet your needs, Contact an expert at 877homes@gmail.com it’s FREE)
2) Make an offer
To make an offer certain legal forms need to be filled out and submitted to the seller. One can try to do this themselves, or hire a lawyer, but in most cases the use and assistance of a real estate agent has been shown to produce the best and most timely results. In most cases the seller will counter the offer and negotiations could go back and forth between the buyer and seller several times before an agreement is reached.
3) Sign a contract
Like in most countries, real estate agents are certified to process real estate purchase contracts. When the purchase contract and all counter offers are signed this commits both the seller and the buyer to the sale. The contract will be subject to certain conditions such as the buyer obtaining a mortgage (if money is borrowed) and the seller ensuring that the title to the property is “clean” and all inspection issues resolved. The buyer should be aware that the commitment to certain dates is binding. It is important to adhere to dates and conditions set out in the agreement, otherwise the seller might take the opportunity to pull out of the sale, particularly if a better offer has been received.
Typically there are fees incurred at the time of purchase. These fees will vary according to factors dictated by the purchase agreement and the method of payment the buyer selects. A good rule is the fees will range between 3% and 5% of the purchase price of the property. Most of the fees are associated with the origination of the loan so if you are offering all cash then your fees will be notably less. Typically the closing fees are for setting up the loan (application fee, credit report, mortgage insurance, appraisal, etc.), physical inspection fee, title insurance, and escrow fee.
4) Inspections and Disclosures
Once the purchase offer has been accepted the buyer has typically 10 to 17 days (the number of days depends on what is in the contract) to complete all inspections and review all disclosures. If the buyer has no problem with the property after reviewing the inspection report and disclosures then all that is left is paying for the property. If on the other hand, some damages or defects are discovered the buyer can request the seller to repair them or reduce the price. The buyer can also back out of the deal even if the seller is willing to do the required repairs or reduce the price.
5) Paying for the Property
When the buyer is using a loan, foreign or US, to assist in buying the property the lender/bank wires the money to escrow. If the buyer is using all cash then they would do the same; wire the money to escrow. Once escrow has all the money, the title insurance, and Grant Deed and everything checks then the purchase is complete except for the final signing of forms at which time the buyer gets the Grant Deed and keys.
For foreigners if the purchase will be with all cash then the process is simple but if financing is needed, there will be some additional work. Banks will typically require 20% or more down and will charge about 1% more on the interest rate. You should compare loan opportunities in your country versus the US.
Cost of Homeownership
As an owner of a house or condo you will have some responsibilities and the main one is paying property tax. Property tax in California is about 1% to 1.25% of the purchase price and increases no more than 2% of the original amount per year. Property tax is paid twice a year, February 1st and November 1st.
If you purchase a condo or a house in a gated community there will be HOA fees (Home Owner Association). The amount of the HOA fees varies from a few hundred dollars to over a thousand dollars per month.
Another fee that is common in newly developed areas is the Mello Roos. The Mello Roos for all intent and purpose is a property tax. Basically the Mello Roos happens when a developer builds many homes in an area the city will require that a new school and/or fire station be built or other improvements made. Instead of adding this cost onto the homes the developer will sell bonds (typically 20 year bonds) and have the new homeowners pay the bonds off. To avoid the interest the homeowner can pay their share of the bonds off early.
What is Title Insurance?
Title insurance protects the buyer of real estate in the case where a situation arises in which the title to a property is clouded. This happens when a person or entity has an interest in the property that was not found or disclosed at the time of sale. (This is very common in countries like Mexico) For example, a lender may have a lien on a property that was not discovered for some reason. The title insurance protects the new owner from any expenses or loss that may occur as a result of this defect in the title.
If you still have questions contact us at 877homes@gmail.com
Monday, September 21, 2009
U.S. Residential Real Estate and Mortgage Industry
Here is what has been happening in the U.S. residential real estate and mortgage industry; particular in San Diego. It might seem long but it is something worth reading for potential buyers to make them more prepared.
Values have increased significantly since the mid 1990's in San Diego due to a shortage of inventory, low interest rates continued job growth that has put upward pressure on prices. Currently however, in the last three years sales activity and prices have declined due to an abundance of current active listing inventory and the current impact of past sub-prime and standard mortgage market activity. Currently, there is volatility in the overall mortgage industry due to this reality. The key contributors to this trend are summarized below with bold headings.
The sub-prime mortgage financial crisis refers to the sharp rise in foreclosures in the sub-prime mortgage market that began in the United States in 2006 and became what some analysts are referring to as a current global financial crisis.
During this time adjustable rate mortgages had become popular, however, property value appreciation has ended in most areas with declines in many locales, leaving some homeowners unable to meet financial commitments and lenders without a means to recoup their losses. The rise in delinquencies and defaults has been concentrated in what industry analysts call "appreciation-dependent mortgages", those that worked for borrowers only if their properties appreciated. Large proportions (but not all) of such mortgages were sub-prime.
Speculative Refinancing is a homeowner presumption that their home will appreciate. This has affected the refinance decisions of many borrowers. Some of these borrowers were influenced by a new breed of financial planners and mortgage brokers who promote the view that unused equity should be used for new investment into common stock, real estate or mutual funds.
Some homeowners used the growing equity in their homes as a way to live beyond their means. They have built up credit card debt, and then consolidate the debt into their mortgage through a cash-out refinance. The consolidation, by extending the term of the credit card debt, reducing the rate and making the interest tax-deductible, would reduce the borrower’s total monthly payment. They could then start building up their credit card debt all over again. This process could continue only so long as their homes appreciated. As soon as appreciation stopped, they were stuck with total debt service costs that might be unmanageable, or with negative equity in their house, or perhaps both.
An additional contributor is known as Speculative Purchases as some homes were purchased with 100% loans by borrowers hoping to turn a quick profit from future appreciation. These loans were made for the full amount of the purchase price (or appraised value) and no down payment was required. When property value appreciation ended, homebuyers taking these loans had negative equity the day they closed escrow, forcing many to re-sell immediately. When home appreciation doesn't materialize, even if the payments remain affordable, the financial incentive to continue to make payments is substantially weakened. Most do continue to pay because they will get tired on waiting and will jump in.
There are still some competitive loans out there but be careful of bait and switch. The three things one should look at when comparing loans are: the APR (not interest rate), LTV (loan-to-value, how much the buyer is putting down), and the type of loan (fixed, ARM, hybrid). To get a good rate a good FICO score is required but also more money down will lower the rate.
These are the MLS statistics for the City of San Diego and San Diego County; they include the number of active listings, average days on market, pending sales and sales that have closed in the past 180 days. (As of September 21, 2009)
City of San Diego
Active Listings: 3017
Average Days on Market: 88
Pending Sales: 2250
Completed Sales in last 180 days: 5845
San Diego County
Active Listings: 9076
Average Days on Market: 102
Pending Sales: 6808
Completed Sales in last 180 days: 17,957
Here is the same information taken on August 22 2007
City of San Diego
Active Listings: 5800
Average Days on Market: 79
Pending Sales: 1154
Completed Sales in last 180 days: 5102
San Diego County
Active Listings: 19,586
Average Days on Market: 82
Pending Sales: 3067
Completed Sales in last 180 days: 13,339
One can conclude that with much fewer homes on the market today when compared to two years ago the real estate market is defiantly recovering.
For all Luxury homes for sale in San Diego County visit www.877homes.com
Wednesday, August 12, 2009
Is Real Estate a Good Investment?
To simplify the home search process I can email you instantly new listings as they become available so you don’t have to spend time searching the internet everyday; just let us know.
Is it a good time to buy real estate? If you have an income and/or money, then YES!
I’m sure you want to know what is happening in the real estate market and where it is going. The best window to the future is the past: by looking at past trends we can see how to take advantage of the market now to benefit your future.
To start with there is a large inventory of homes on the market (presently about 15,000 in San Diego County). With increased supply, prices have decreased. With a possible recession caused by the economy, lenders have lowered interest rates to encourage buying by borrowing. The past and present Presidents have authorized the Treasury to produce over $1.5 trillion to stimulate the economy. This increased supply of money, like with homes, will decrease the value of the US dollar which, as we have seen in the past, will in turn cause inflation. To counter inflation the Federal Reserve will then have to increase the demand for US currency by increasing the interest rates.
What this means for you is that if you have steady income or you are looking to invest your money in something other than the stock market, CDs, and bonds, then real estate is probably the best choice.
If you are an investor, then you know it makes sense to borrow as much money as you can and lock it in at the low interest rates with a fixed 30 or 40 year loan. If interest rates go up you are locked in at the low rate. If inflation starts to kick in, then you can take advantage of the situation by increasing rent while still making low interest payments.
If you are a first time buyer, then it only makes sense to buy in a buyer’s market and with the interest rates low it only makes more sense. On top of all that there is an $8000 tax credit for qualified buyers (see a tax professional for details). I know you want to buy when the real estate market hits bottom, but you should not be just looking at prices; you need to be looking at interest rates too since these will affect you if you plan to get a loan. A 5% decrease in price is more than offset by a 0.5% increase in the interest rate. For example, if you borrowed $100,000 at 5% interest rate on a 30yr fixed loan, your payments will be $536.82. Now if you borrowed $95,000 at 5.5% interest rate on a 30yr fixed loan, your payments will be $539.40.
When you are ready to learn more about the real estate market in San Diego give me a call or shoot me an email. Together we can find the perfect fit for you.
For all Luxury homes for sale in San Diego County visit www.877homes.com